Are solar panels a good investment? New Berkeley study offers an answer

How much does going solar shave off those electricity bills? A major new study by scientists at Lawrence Berkeley National Laboratory that analyzed 500,000 households across the U.S. in 2021 offers the best snapshot to date on estimated savings of rooftop solar for American consumers.

The study found the median American household saved an estimated $691 a year when all the costs and benefits were included.

“This is one of the most comprehensive, household-specific, national estimates of rooftop solar impacts on household energy burden,” said lead investigator Sydney Forrester, a policy researcher in the Energy Markets and Policy Department at the Laboratory, a federally funded research and development center in the hills of Berkeley.

Much previous research has focused only on direct utility bill savings of solar power, which can be misleading. For instance, if the cost of installation is excluded, the median household would erroneously calculate $1,987, not $691, in savings.

The new study provides a more complete accounting because it includes upfront installation fees and ongoing loan or lease payments, as well as any solar incentives. And it compares the benefits reaped by households with different incomes.

Nationwide, installation of solar panels in low-income households reduced the proportion of the family budget spent on energy from 7.7% to 6.2%, an estimated savings of $660 a year, the study said. In moderate-income households, it reduced the the proportion they spent on energy from 4.1% to 3.3%, saving $674 a year. And in higher-income households, the amount spent on energy dropped from 2.4% to 1.9%, saving $711 a year.

The study did not look at actual savings, because that data is not available. Rather, it modeled the household savings based on estimates of income, household utility bills, local electricity prices and consumption. Almost everyone in the study was a single family homeowner, with a few multifamily or rental homes.

Not every home reaps a benefit from solar power, the researchers found. On average, solar adoption reduced the cost of energy for about three-quarters of U.S. households.

The benefits of solar power varied by region. In the West, especially California, high electricity prices and a competitive solar marketplace led to the greatest cost reduction. Homes in the Midwest experienced lower costs, although they were less pronounced. Homes in the Northeast also saw a benefit, although their overall energy costs remain high due to dependence on non-electric sources, such as propane and fuel oil.

In the South, solar power actually increased the overall cost of energy, because electricity prices from conventional sources are so low. For low-income Southern families, the cost of solar exceeded the benefit by $435 a year.

Low-income residents in the U.S. West who have installed solar power experience the greatest benefit with the proportion of estimated household income spent on energy falling from 7.3% to as much as 5.7%, saving an estimated $821 a year.

In future work, the Laboratory team will study the potential of solar savings for a broader variety of homes, including renters and multifamily dwellers, Forrester said. She hopes to expand the study to include “community solar” and other strategies that don’t require rooftop ownership.